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Cage 325
Wilson Creek State Bank
Records, 1904-1935
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| Washington State University Libraries Manuscripts, Archives, and Special Collections Pullman, WA 99164-5610 USA (509) 335-6691 Inquiries |
Cage 325
Wilson Creek State Bank
Records, 1904-1935
The early records of the Wilson Creek State Bank, a commercial bank of Wilson Creek, Washington, known as Bank of Wilson Creek, 1901-1903; State Bank of Wilson Creek, 1903-1904; Citizens Bank, 1904-1907; Citizens State Bank, 19071912; Wilson Creek State Bank, 1912-1935; Wilson Creek State Bank of Ephrata, 1935-1946; Grant County State Bank, 1946-1954; and Ephrata Branch of Peoples National Bank of Washington, 1954- ; were deposited with the Washington State University Library in 1974 and 1975 by E. Roy Mundy of Ephrata. The papers were processed from September, 1976 to February, 1977 by Lawrence Stark.
ORGANIZATIONAL HISTORY
A bank was among the first institutions established at the town of Wilson Creek. This town, originally spelled as Wilsoncreek, had been laid out informally in about 1900 or 1901. Its site appeared to be the most promising for a town in Washington's Big Bend area, rapidly going through a transition from a range and grazing area to one dominated by dry-farming. A host of mercantile institutions quickly approved of Wilson Creek and for their benefit a commercial bank was established. Thus, by mid-1901 a bank had been organized at Wilson Creek.
Not much is known about this earliest banking institution, for few of its records were passed on to its successors. It began as a private, or incorporated, bank, styled the Bank of Wilson Creek, and was associated with the insurance and real estate firm of Emmert and Swanson. Donald Urquhart, a rancher who had lived near the site of Wilson Creek for many years prior to the beginning of the town, served as president. In January of 1903 this bank dropped the private bank format and filed articles of incorporation as the State Bank of Wilson Creek. The bank continued under this arrangement for a little over a year, at which time several of the original partners left Wilson Creek and sold the bank to John D. Bassett of Ritzville. Bassett was then the President of the First National Bank of Ritzville and the principal owner of a chain of banks in central Washington. Among the dozen or so Bassett banks could be found national banks, state banks and private banks. For the Wilson Creek establishment, Bassett chose to adopt the private bank form, having the predecessor State Bank of Wilson Creek disincorporated and a successor firm known as the Citizens Bank substituted in its place in May of 1904.
Upon Bassett's acquisition of the bank, management was passed to one of his associates, John W. Brewer, who served as Cashier for several years. Brewer was also the United States Land Commissioner for Douglas County, as well as the successor of the old firm of Emmert and Swanson. Later he emerged as the principal minority stockholder of the bank.
From 1904 to 1907 the bank operated as the unincorporated Citizens Bank. In 1906 Brewer moved it to a new brick building, built especially for the Bank. This building is now standing, empty and abandoned in Wilson Creek although it has recently been named a historic building by the National Park Service. About the time the building was being erected, owner J. D. Bassett was elected to the Washington State legislature and became chairman of the House Banking Committee. From that post he led the movement which resulted in the state's banking code of 1907. This code finally gave Washington a unified banking law, established a banking examiner's department and brought some regulation to the heretofore almost totally unsupervised state banks. For Wilson Creek, this law led to incorporation under the new provisions and a change in name to Citizens State Bank in late 1907.
Two years later the nature of the bank again changed dramatically when J. D. Bassett combined his chain of banks with several other eastern Washington banks under a holding company known as the Union Securities Company. For a brief time Bassett appeared as the principal figure in this company, but by 1911 he had withdrawn to form a mortgage placement firm and the holding company's identity as an extension of the Old National Bank of Spokane became much clearer. The Old National Bank had in fact been the instigator of the formation of the Union Securities Company, as is evidenced by the similarity of its name to that of the Union Trust Company, the state bank and investment organization which was interlocked with the Old National Bank. As part of the Union Securities group, the Citizens State Bank joined about twenty other eastern Washington banks in this early experiment at bank consolidation.
The Union Securities Company instituted certain basic policies for the bank, including regular auditing and supervision, as well as management of the Citizen State Bank's reserve deposit at the Old National Bank. Union Securities also kept its ownership at fifty-one percent of the capital stock, while most of the remainder was sold to Wilson Creek area citizens. This policy resulted in a board of directors from the Wilson Creek area--including Donald Urquhart, president of the old Bank of Wilson Creek, who now emerged as the President of the Citizens State Bank.
One of the first things the Union Securities management learned about the bank was that J. W. Brewer, and interim cashiers who had managed the bank before Bennett was appointed, had over-extended the bank, leaving it holding a number of doubtful notes. Many were based on agricultural loans which had not paid off. The state bank examiner also discovered this large number of bad assets and began to threaten closure in 1912. At this point the Union Securities Company financed a reorganization which took the form of a new bank--the Wilson Creek State Bank-which bought all the good assets of the bank and continued as before. The doubtful notes were carried by the old Citizens State Bank until either collected or abandoned, a process which took until 1915 to complete, after which the old bank was disincorporated.
T. Claud Bennett thus became the Cashier of a "clean" bank in 1912 and for the next five years managed it under the cautious lines suggested by the Union Securities Company. Rather than carrying many local loans of high risk, he entered loans conservatively. He also carried a large reserve balance at the Old National Bank, drawing on it during the annual crop-moving season, but otherwise allowing it to grow. Apparently his policy meant some tightening of local credit, for despite Bennett's public image as a promoter of central Washington development and agriculture, local residents remained dissatisfied. Nevertheless Bennett survived until 1917 despite controversy over the bank and over his role as the chairman of the Grant County Progressive Party. The bank even found tremendous public support when in 1915 it was robbed by a lone gunman, who was quickly pursued and shot to death by an informal local posse. But dissatisfaction continued and by 1917 a local group began to form plans to organize a new, locally-owned bank.
The leaders of the drive to organize a new bank were a Wilson Creek attorney, Clarence J. Lambert and the manager of the local grain warehouse, Detlev F. Mordhorst. They found considerable local support, especially since war-time prosperity and inflation were swelling monetary statistics in Wilson Creek. The state banking department remained more cautious and advised that the little town could not support two banks. Consequently, when the Union Securities Company hinted at sale of their bank, Mordhorst and Lambert moved quickly to acquire it. With the help of the Exchange National Bank of Spokane, the Old National Bank's principal large competitor, the local group bought out all the old stockholders in mid-1917. Ownership now changed to a local group of about 150 residents, each owning but a few shares of stock. Mordhorst became the new Cashier and the bank's reserve account was taken from the Old National Bank and placed with Exchange National.
The arrangement with the Exchange National Bank seemed to offer more local control than the previous group-banking arrangement. Yet, in many ways the destiny of the Wilson Creek State Bank came under the domination of Exchange National in a way that the Old National had never approached. At first the new arrangement went well. War-time money swelled deposits and the bank began to have a large business. The annual crop cycle proved less troublesome. The bank began to discover the necessity of finding more loans. At first the simple reserve account at the Exchange sufficed, but in the early 1920's the bank began to buy discounted notes from the Exchange, as these paid a much better return than interbank deposits. Moreover, they were of short duration and could be converted to cash or bank balances with ease. Thus the policy of buying notes from the Exchange National Bank became very attractive.
The purchased notes, however, turned disastrous to the Wilson Creek State Bank as they brought the bank into a complex financial affair known as the Herrick loans. The Herrick loans were a large series of notes on various Idaho and Oregon timber operations associated with Fred Herrick of St. Maries, Idaho. Herrick was then one of the larger log and lumber operators in North Idaho and unlike others of his time he had not financed his operations through the use of public stock issues, bonded indebtedness or the support of investment bankers. Instead he simply borrowed from the Exchange National Bank, which in turn sold the notes to a number of banks throughout the inland northwest. When Herrick's financial empire collapsed in 1928, it had direct repercussions for all these banks. Among them was Wilson Creek State Bank, which was told by the state examiner in November of 1928 to carry the Herrick notes at one-half of face value pending the settlement of the bankruptcy. Two weeks later, the bank examiner discovered that this caused such a reduction of the value of assets held by the bank that it was no longer in good financial condition. He then closed the bank on December 4, 1928. Twelve other banks holding Herrick paper were also closed about the same time. Two weeks later the Exchange National Bank failed.
Yet the Wilson Creek State Bank persisted despite this closure. The state examiner appointed a liquidating officer; however, even before he could begin his work, local plans to reorganize and reopen the bank appeared. Cashier Mordhorst led the effort, which he called the hardest thing he had ever undertaken. He found sympathy for the plan among the local stockholders and depositors who agreed to form a depositors' committee and secure partial waivers on the deposits. They also managed to find additional new capital for the bank. This plan satisfied the bank examiner, and the bank reopened in March of 1929, even before the plan went into effect. During the next month, all the old capital stock was exchanged for that of a seemingly new bank, although it still bore the same name. It differed in that it now had a few principal stockholders instead of the broad-based community ownership. The new investors were the Wilson Creek Union Grain and Trading Company and Spokane businessman James Ramage, president of the Continental Coal Company. Ramage, and his associate Lee Thorpe, owned a ranch in the Wilson Creek area, but still were not considered local residents. Consequently they both turned down the presidency of the new bank.
With the failure of the Exchange National Bank the reopened Wilson Creek State Bank needed a new reserve account holder. For a few months the account was placed with the American State Bank of Spokane, but the arrangement quickly proved unsatisfactory, for the American State Bank was of little assistance in the annual financial cycle. Mordhorst then considered the somewhat drastic move of placing the principal reserve account in Seattle, where the bank had long held a small account. When Seattle bankers advised otherwise, he returned to Spokane, placing the account with the Spokane and Eastern Trust Company. This was in spite of much criticism stemming from the fact that many of its key figures had been former employees of the Exchange National Bank and had participated in the disastrous Herrick affair. Despite this Mordhorst persisted and the Wilson Creek bank continued to look to the Spokane and Eastern for leadership during the next several years.
Reorganization had been barely completed when general financial panic struck the country in 1929 and 1930, dropping the economy into depression. Wilson Creek had had a hint of it for several years previous and, ironically, was able to fairly easily weather the banking contraction of 1929-1933. This was possible because the 1929 reorganization had taken out most of the bad assets and instituted new and cautious policies at the bank. Nevertheless, deposits dropped off considerably and loans became ever more uncertain. One by one banks of central Washington failed and within a few years the Wilson Creek State Bank was the only operating bank left in Grant County. By 1931 Mordhorst had concluded that the bank could not last unless consolidated with another bank or moved to a more promising location. For four years he negotiated with other banks and the state authorities concerning a consolidation, only to see all the other banks fail before he could complete an agreement.
Local residents took a long time before consenting to the move. In the meantime the bank's deposits shrank drastically. On top of that the bank was again robbed. This time, however, no local posse appeared as in 1915 and it remained for Spokane police to apprehend the robbers. Then a small run on the bank seemed to be materializing just prior to the bank holiday of 1933, although the bank reopened soon after and experienced no problem of rapid withdrawals. The bank continued to struggle through 1934, all the time with Mordhorst attempting to sway a few more stockholders to support the move. Finally he lined up a majority and the state examiner gave permission to move to Ephrata. In early 1935, the bank rented an unused bank building in Ephrata, moved a few of its records and properties, wrote off the old building and began a new phase in its existence. On its first day in Ephrata it received a large influx of new business and from that time on it became a stable, if not prosperous business.
The bank became informally known as the Wilson Creek State Bank of Ephrata at its new location. In 1946, the name was changed to Grant County State Bank to end the confusion caused by the old name. In the mid-1950's it was converted to a branch of the Peoples National Bank of Washington, a Seattle-based bank, and it continues to operate as such. Eventually the Peoples National opened a branch in a prefab building in Wilson Creek.
The old bank building at Wilson Creek stood largely unused except for attorney Southard's office after 1935. Ultimately Southard acquired the building and its contents, which he sold to Ephrata realtor and historical collector E. Roy Mundy in 1963.
DESCRIPTION AND ARRANGEMENT
The records of the Wilson Creek State Bank comprise approximately 36,000 items of correspondence, legal and financial documents, notes, minutes, memoranda, and account books, dating from 1904 to 1935. Over one-half of the records consist of general correspondence, while a variety of records concerning ownership, management and the conduct of business make up the remainder. A considerable body of transactional records--primarily cancelled checks written to reserve agents or correspondent banks--have been removed from the records.
In the interest of documenting the cognitive framework within which the records were created, the original record-keeping system has been retained as the basis of arrangement. Several peculiarities exist in this system, particularly in the General Correspondence, and the user of these records should be aware of them.
The bank employed a variety of record keeping procedures over the years. At first it simply placed papers in alphabetically divided letter boxes. Vertical filing with alphabetical arrangement was begun about 1909, with some earlier material being worked into this arrangement. The system of alphabetical filing continued until 1932, after which material was simply retained in a chronological sequence. During the intervening period, the alphabetical system developed in such a way that it would be closed about every two years, although the bank never adopted the practice of closing, and beginning a new sequence, at regularly scheduled intervals.
Within the alphabetical sequence, other peculiarities also appeared. The most prominent was the practice of irregular use of alphabetical designators. Thus material from the Grant County Auditor would be filed under "G" for Grant County, "A" for Auditor, and often some other letter designating the initial of the person serving as Auditor. Likewise correspondence with the state banking authorities would be divided among the letters "E", "S", and "W" designating respectively Examiner, State (banking department) and Washington (banking department). Several other similar situations also arose. Although this appears at first to be merely a case of bad filing in a cumbersome system, this practice undoubtedly worked reasonably well for the bank's purposes, requiring simply that anyone consulting the files examine three or four possible locations for material relevant to a particular matter. In the bank it is probable that the filer and the searcher were one and the same.
Retention of these record keeping practices within the archival arrangement necessitates the user's employment of the same practices which bank personnel used to locate material within their files. Therefore, one must be cautioned that the inefficiencies inherent in alphabetical filing systems are typified by these records. The user is also advised that the records have been subjected to extreme water and mold damage. Consequently many items are very fragile and almost all have ingrained soil particles.
CONTAINER LIST